Thursday, May 06, 2010

Why Greece is in trouble. And a warning for us.

From Neal Boortz:
Some of you may think that I am being dramatic when I say that images of Greece may soon become a reality in America, if we continue down our current path. Yeah ... that's me. Mr. Drama. There are two main issues that led to the downfall of Greece. First, the government took on too much debt, which means the Greek government spends too much money. While our own government debt is alarming - and growing at record rates with The Community Organizer in charge. We're in a financial crisis right now - not as bad as Greece, but bad enough - but it wasn't caused so much by government debt as it was by government ineptness. It was private debt that sent us into a tailspin. Specifically, trillions of dollars owed on real estate loans by people who didn't have and never had much of a chance of paying those loans off. Our government debt problem can still be solved - but not with this man in the White House and these big-spenders controlling the congress.

What is going to be a lot harder to solve is the second issue that led to Greece's downfall: an entitlement culture. Greece is a country that has managed to convince its people that they need the government in order to survive. Not only do they need the government but they are ENTITLED to certain things, and like any good entitlement culture, that list of "things" only grows and grows. Suddenly, the people of Greece believe that they are owed a comfortable life by their government, even if they are not willing to work for it.

In Greece the average government worker retires at 58 years-of-age with 80% of their final basic salary. The Greek government can't even tell you how many government employees there are. Some estimate that figure to be one out of three Greek workers. Unions run the show and the government marches to the demands of union leaders. In this regard Greek government officials are much like our own. Unlike the private sector, when government officials are met with unreasonable union demands for wages and job security they don't have to crunch the numbers to see if the demands can be met with any degree of fiscal responsibility. After all .. they can just raise taxes. You start weighing the effect of unions working against your reelection to the mindless voters remembering a tax increase a year later when they go to the polls and ... well, it's not hard to figure out.

Over the years, Greek salaries and pensions have risen 30% above Greek productivity ... in other words, they were getting paid more than they were worth. Not only that, but they felt ENTITLED to this payment and only sought to gain more and more while doing less and less. We are talking about a culture where being a hairdresser is considered a "hazardous job" ... a hazardous job that makes you eligible to retire with a full pension (funded by the government) at the age of 50. But it's not just hairdressers, there are 580 other job categories that have managed to convince the government that there job is so hazardous that they are worthy of an early retirement - 50 for women and 55 for men. Radio and TV presenters - I guess that would include yours truly - can take early retirement because they are thought to be at risk from bacteria on their microphones. Musicians who play wind instruments .. they can retire at age 50 because they have to deal with gastric reflux from all the puffing and blowing.

No, I am not making this stuff up. This is what happens when you have a country that believes they are owed everything and a government that is willing to give it to them because that gives them (the politicians) more power. In the meantime, paying for this mentality mattered not ... until now.

Are we now watching the final chapter in Greece? The EU and the IMF are ready to bail out Greece with over $150 billion dollars, but there are strings. Wages are going to have to be cut. Government employees are going to lose jobs ... and, as you can see if you peel your eyes away from Inside Edition this evening ... the Greeks don't like it. They're rioting. They're attacking their own police officers. They're destroying property. Greece is virtually paralyzed by violence .. people reacting to the reality that their cushy ride might be coming to an end. You're seeing what happens when a parasite is separated from the host ... when the protected and coddled face the prospect of having to develop a bit of self-reliance.

Could this happen in America? Can someone please tell me why it could not?

The situation in Greece has become unsustainable. Government unions are the biggest culprit.

Unions thrive only when they have a healthy host to feed off of. But too often they see their host as an enemy to be destroyed. If they succeed in weakening or destroying their host, they also weaken and destroy themselves.

Some Unions in the private sector understand this, and work with their capitalist host to ensure the company remains profitable; the relationship is more symbiotic than parasitic. Ford Motor Company comes to mind. They are unionized, but didn't need a bail-out like GM. Ford and the Union maintained a balance, so they could both survive and prosper.

Such enlightened self-interest is not practiced by government unions, which tend to see their host as having unlimited deep pockets. When permitted to grow unchecked, the Greece Crisis is the inevitable result.

As the unionized portion of our own government continues to grow rapidly under the current administration, we would be wise to learn from the mistakes of Greece, so as not to repeat them.

Also see: Beware of Greeks bearing Red Flags



Anonymous said...

Very interesting indeed....
greed and slothfulness will bring down any house built on
Greece and its people seem to have done.

Anonymous said...

And Australia could go the same way..common sense is what we need instead of greed..Martin